It was recently argued that as a nation we have lost our ability to create new industries out of big ideas, meaning fewer high-paying jobs and weak economic growth. As someone who converts ideas in actions for a living, who is working to make sure the region does not lose its innovative edge, I find it is not our failure to have big ideas that threatens us, it’s that we don’t capitalize on our big ideas.
We tend to think that our national economy is best left to the free market. Many of us equate regulation and government intervention as inhibiting the free movement of ideas, capital and labor. Stock market values of companies in regulated industries have increased dramatically over the last month as it becomes clearer that President-elect Donald Trump is committed to lessening government involvement. Some predict accelerating economic growth and job creation.
However, a blanket reticence to regulate may impede our ability to convert new ideas into industry. When it comes to creating conditions for new industries, the government has a huge role to play.
Our economy does not grow at a consistent rate. Its growth rate expands most dramatically during an industrial wave — meaning a period where a new technology is broadly adopted, changing the fundamental underpinnings of employment, entrepreneurship and capital. Consider intercontinental railroads, automobiles, electrification, radio, television, semiconductors, software, the Internet, wireless communication and mapping the human genome and the effect each had on the creation of commercial opportunities. Each of these technologies fostered industrial waves.
The federal government’s role in creating the conditions for industrial waves is demonstrable.
For example, the adoption of the intercontinental railroads was driven by a desire for a mechanism to transport federal troops around the nation. The government ensured that standardization of trackbeds occurred, created time zones to keep trains on schedule and adjusted freight rates so they wouldn’t choke farmers and businesses relying on railroads to transport their goods.
We can thank the federal government’s breaking up AT&T’s longstanding monopoly in telephony for our rapid adoption of new telecommunications technologies, the growth in consumer alternatives for long distance, and wireless. In fact, the underpinnings of the Internet and mobile that have driven these new alternatives were funded and fostered by research and development from our Department of Defense.
Ideas becoming industries are at the heart of disrupting the status quo. Just like an old tree must fall for the sapling to find the sun, incumbent companies must step back so others can rise. However, large companies will not simply cede so others can succeed, and those profiting from the status quo will not merely stand aside to allow the future to emerge. Interestingly, the federal government is often the woodcutter clearing that forest, or the gardener protecting the saplings.
Look at current technological ideas that that could emerge as new industrial waves: artificial intelligence, alternative energy and conservation, artificial life or proteomic medicine and see also large established businesses happy with the status quo which are often standing in the way.
Sure, we want a market free of government intervention, but we might be creating conditions that inhibit our growth. Sometimes government intervention is both necessary and desirable, and it is our duty to remind the incoming administration of that distinction.
Column originally posted at WashingtonPost.com.